Post by gallito on Oct 14, 2015 19:43:05 GMT -5
Nearly seven years after Bernie Madoff's investment empire was revealed to be a $17.5 billion US fraud, the battle by investors to recover their losses ramps up in a case that goes to trial this week in Seattle.
A Washington state investment company is seeking to pin about $100 million of its losses from Madoff's crimes on auditor Ernst & Young.
FutureSelect Portfolio Management of Redmond and some related firms, headed by hedge fund manager Ronald Ward, lost a total of about $129 million in the pyramid scheme. In court papers, the company alleges that Ernst & Young would have uncovered the scheme if it had taken even the most basic steps to verify Madoff's assets — something the auditing firm denies it had any obligation to do.
"This case is about the Madoff fraud and how it got to Washington state and how it's impacting real people in Washington state," said FutureSelect lawyer Steven Thomas. "Because Ernst & Young said the numbers were good, FutureSelect invested. Ernst & Young said over $4.2 billion in assets were real; they were fake."
Ernst & Young says its role was limited
In a trial brief filed this month, Ernst & Young argued that it had a very limited role: to audit the financial statements for four of the 10 years FutureSelect invested in Madoff's funds. Its audits, for which it was paid $40,000 apiece, were simply to provide "reasonable assurance" that Tremont's financial statements were free of misstatements. Tremont's financial statements said its funds owned securities in Madoff's custody, which Ernst & Young said it confirmed by checking with Madoff.
Ernst & Young said its approach was consistent with that taken by every other auditor of every Madoff-advised fund.
And in contrast with the modest fees it received, the auditing firm said, Ward and Future Select received tens of millions of dollars in management fees.
"Any critical analysis of Madoff's purported strategy would have shown his astonishingly consistent returns were simply too good to be true," Ernst & Young's lawyers wrote. "Whether through wilful blindness or negligence, Mr. Ward's decision to continue investing with Madoff-advised funds (and continue reaping the resulting fees) caused FutureSelect to suffer losses when Madoff revealed his fraud."
Thomas disputed that Ward received tens of millions in fees, but said he did lose more than $10 million of his own money in the fraud.
Jury selection in the case was to start Monday. The trial is scheduled to last about one month.
www.cbc.ca/news/business/bernie-madoff-investors-1.3267537
A Washington state investment company is seeking to pin about $100 million of its losses from Madoff's crimes on auditor Ernst & Young.
FutureSelect Portfolio Management of Redmond and some related firms, headed by hedge fund manager Ronald Ward, lost a total of about $129 million in the pyramid scheme. In court papers, the company alleges that Ernst & Young would have uncovered the scheme if it had taken even the most basic steps to verify Madoff's assets — something the auditing firm denies it had any obligation to do.
"This case is about the Madoff fraud and how it got to Washington state and how it's impacting real people in Washington state," said FutureSelect lawyer Steven Thomas. "Because Ernst & Young said the numbers were good, FutureSelect invested. Ernst & Young said over $4.2 billion in assets were real; they were fake."
Ernst & Young says its role was limited
In a trial brief filed this month, Ernst & Young argued that it had a very limited role: to audit the financial statements for four of the 10 years FutureSelect invested in Madoff's funds. Its audits, for which it was paid $40,000 apiece, were simply to provide "reasonable assurance" that Tremont's financial statements were free of misstatements. Tremont's financial statements said its funds owned securities in Madoff's custody, which Ernst & Young said it confirmed by checking with Madoff.
Ernst & Young said its approach was consistent with that taken by every other auditor of every Madoff-advised fund.
And in contrast with the modest fees it received, the auditing firm said, Ward and Future Select received tens of millions of dollars in management fees.
"Any critical analysis of Madoff's purported strategy would have shown his astonishingly consistent returns were simply too good to be true," Ernst & Young's lawyers wrote. "Whether through wilful blindness or negligence, Mr. Ward's decision to continue investing with Madoff-advised funds (and continue reaping the resulting fees) caused FutureSelect to suffer losses when Madoff revealed his fraud."
Thomas disputed that Ward received tens of millions in fees, but said he did lose more than $10 million of his own money in the fraud.
Jury selection in the case was to start Monday. The trial is scheduled to last about one month.
www.cbc.ca/news/business/bernie-madoff-investors-1.3267537